2015 (7) TMI 919 - HC - Income Tax

Addition under section 69A - unaccounted jewellery - Held that - Section 69A of the Act provides that where in any financial year, an assessee is found to be the owner of any jewellery which is not recorded in the books of account and the explanation offered by assessee about the nature and source of acquisition is not satisfactory, then value of such jewellery would be deemed to be income of the assessee in the year in which the assessee was found to be the owner of the jewellery. Admittedly, the locker key which was seized by the department during the course of the search on 20 March 1986, did not belong to the appellant. Thus on that date the quantum of jewellery in the locker of Mrs. Malani which belonged to the appellant could not be ascertained/forecast. The normal presumption would be the jewellery in the locker of Mrs. Malani would belong to her and not to another person. Therefore, it is only on opening of the locker of Mrs. Malani on 28 July 1986, did the revenue find the jewellery and also that some part thereof, belonged to the appellant as claimed by the appellant and as also declared by Mrs. Malani in her assessment proceedings as recorded in the order of her Assessing Officer at Kolkata on 25 November 1986. Thus it is only in the previous year relevant to the Assessment Year 1987-88 i.e. financial year 1 April 1986 to 31 March 1987 that the appellant was found to be the owner of the jewellery in the locker belonging to Mrs. Malani. Decisions relied upon by the appellant do not have any application to the present facts. The basic difference in all the cited cases to the present facts is that the locker key which was seized on 20 March 1986 did not belong to the appellant but to one Mrs. Malani and therefore it was only on the opening of her locker that the question of finding jewellery in the locker and if found, the ownership of such jewellery would arise for determination. In all the cited cases the offending goods/money etc was found in the possession of the party in whose hand Section 69A of the Act was applied. - Decided against assessee. Double taxation - whether Tribunal erred in confirming the addition of ₹ 2,01,100/- in the Assessment Year 1987-88 specially in view of the addition made in the assessee s own case for the Assessment Year 1986-87 which addition includes the alleged source of the jewellery valued at ₹ 2,02,100/-, thereby resulting in a double addition? - Held that - Explanation is not acceptable for the reason that at no point of time, the jewellery found in the locker was sourced from the cash received by the appellant from M/s Industrial Meters Ltd. The case of the appellant has always been the jewellery found in the locker was a gift received by him on 27 January 1986 from his aunt. This theory of gift being received from his aunt was not accepted by the authorities under the Act including the Tribunal. Thus the deemed income being the cost of jewellery found in the locker of Mr. Malani being assessed to tax in Assessment Year 1987-88 cannot be found fault with. - Decided in favour of the revenue

Summary

Issues Involved:
1. Whether the Tribunal was correct in confirming the addition of Rs. 2,01,200 under Section 69A of the Income Tax Act for Assessment Year 1987-88.
2. Whether the Tribunal erred in confirming the addition of Rs. 2,01,100 for Assessment Year 1987-88, considering the addition made for Assessment Year 1986-87, leading to double addition.

Issue-wise Detailed Analysis:

1. Addition under Section 69A for Assessment Year 1987-88:
- Appellant's Argument: The appellant argued that the locker key was found on 20 March 1986, and thus, the jewellery should be considered as found in the previous year relevant to Assessment Year 1986-87. The finding of the jewellery was claimed to be based on the possession of the locker key, not the actual opening of the locker. The appellant cited decisions from Gauhati High Court, Madhya Pradesh High Court, and Bombay High Court to support their claim.
- Respondent's Argument: The respondent countered that the locker key belonged to Mrs. Malani, not the appellant. Therefore, the ownership and value of the jewellery could only be ascertained upon opening the locker on 28 July 1986. Thus, the correct assessment year is 1987-88.
- Court's Analysis: The court held that Section 69A applies when an assessee is found to be the owner of unexplained jewellery in a financial year. Since the locker key did not belong to the appellant, the jewellery's ownership and value could only be determined upon opening the locker on 28 July 1986. The cited cases were distinguished as they involved possession by the assessee, unlike the present case where the key belonged to Mrs. Malani. Therefore, the jewellery was correctly assessed in Assessment Year 1987-88.
- Conclusion: The first question was answered in the affirmative, in favor of the revenue and against the assessee.

2. Double Addition of Rs. 2,01,100:
- Appellant's Argument: The appellant contended that the jewellery found in Mrs. Malani's locker was sourced from cash received from M/s Industrial Meters Ltd., which was already considered in Assessment Year 1986-87. Thus, assessing the jewellery in Assessment Year 1987-88 would result in double taxation.
- Respondent's Argument: The respondent argued that the appellant never claimed the jewellery was purchased from the cash entries in the diary of M/s Industrial Meters Ltd. The appellant's consistent claim was that the jewellery was a gift from his aunt, which was not accepted by the authorities.
- Court's Analysis: The court noted that the appellant's explanation of the jewellery being a gift was rejected by the authorities. The appellant never linked the jewellery to the cash received from M/s Industrial Meters Ltd. Therefore, the addition of the jewellery's value in Assessment Year 1987-88 was justified.
- Conclusion: The second question was answered in the negative, in favor of the revenue and against the appellant.

Final Judgment:
The appeal was dismissed with no order as to costs.